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$Unique_ID{bob01018}
$Pretitle{}
$Title{Iran-Contra Affair: The Report
Chapter 3C   Alternative Funding Sources:  North's Response}
$Subtitle{}
$Author{Various}
$Affiliation{}
$Subject{north
rodriguez
poindexter
operation
dutton
cia
president
abrams
meeting
told}
$Date{1987}
$Log{}
Title:       Iran-Contra Affair: The Report
Author:      Various
Date:        1987

Chapter 3C   Alternative Funding Sources:  North's Response

     The Administration continued to seek an appropriation for the CIA to
resume its program of covert assistance to the Contras.  In early May,
according to Poindexter, the President told him, "If we can't move the Contra
package before June 9, I want to figure out a way to take action unilaterally
to provide assistance."  Poindexter wrote his deputy, Donald Fortier, "The
President is ready to confront the Congress on the Constitutional question of
who controls foreign policy . . . .  George [Shultz] agrees with the President
that we have to find some way and we will not pull out."

     North, who received a copy of Poindexter's PROF note, responded
immediately with a suggestion: The Contras should capture some territory
inside Nicaragua and set up a provisional government.  The President would
respond by recognizing the Contras as the true government and provide support.
Asked by Poindexter whether he had talked to Casey about his plan, North
replied, "Yes, in general terms.  He is supportive, as is Elliott [Abrams].
It is, to say the least, a high risk option - but it may be the only way we
can ever get this thing to work."

The Money:  Third Country Assistance

     By the end of April 1986, the Contras' funding needs were critical. North
told Fortier:  "We need to explore this problem urgently or there won't be a
force to help when the Congress finally acts."  The same day, North wrote to
McFarlane that "the resistance support acct. is darned near broke," and asked
for assistance in filling the gap:

Any thoughts where we can put our hands on a quick $3-5 M?  Gaston [Sigur] is
going back to his friends who have given $2 M so far in hopes that we can
bridge things again, but time is running out along w/the money.  So far we
have seven a/c working, have delivered over $37 M in supplies and ordnance but
the pot is almost empty.  Have told Dick [Secord] to prepare to sell the ship
first and then the a/c as a means of sustaining the effort.  Where we go after
that is a very big question.

An Aborted Solicitation

     Despite North's reference to "Gaston," it was not Gaston Sigur, but
Singlaub who went to the Far East in May 1986 in search of Contra aid.  This
time, Singlaub wanted to be sue that he would receive the official U.S.
"signal" these countries had previously told him was a condition to their aid.
Before he traveled to Countries 3 and 5, Singlaub spoke to Elliott Abrams at
the State Department and, according to Singlaub, explained that he wanted to
know "how the U.S. would send a signal."  Singlaub testified that Abrams told
him that he (Abrams) would send the signal.

     Singlaub arrived in Country 3, but before he could meet with his contact,
Abrams told him to stop the plan.  When Singlaub and Abrams later met,
Singlaub testified that Abrams told him that the solicitation was "going to be
handled by someone at the highest level."  Singlaub assumed that it would be
someone from the White House, although Abrams never gave him a specific name.
However, Abrams disputed Singlaub's testimony.  While acknowledging that he
spoke to Singlaub about Singlaub's proposed solicitation, Abrams testified
that he never agreed to provide to Singlaub a U.S. Government signal for the
solicitation.  Abrams' account is supported by the testimony of Richard
Melton, at the time Director of the Office of Central American Affairs at the
State Department, who was present during Abrams' conversations with Singlaub.

The May 16, 1986, NSPG Meeting

     On May 16, 1986, the President and his advisers discussed the issue of
obtaining funds from third countries.  In a memorandum to the President for
the National Security Planning Group (NSPG) meeting, North suggested three
ways to "bridge the gap" in funding:  (1) a reprogramming of funds from DOD to
the CIA ($15 million in humanitarian aid); (2) a Presidential appeal for
private donations by U.S. citizens; and (3) a "direct and very private
Presidential overture to certain Heads of state."  The last source of funds
would, as North put it, eliminate the need "to endure further domestic
partisan political debate."

     Director Casey opened the meeting and explained the Contras' needs.  The
good news, he told the President, was that the Contras had infiltrated more
troops into Nicaragua than ever before, and the troops were now being
resupplied by air.  The "bad news" was that the Resistance was operating under
the assumption that it would receive new funding at the end of May. Only $2
million remained from the humanitarian assistance appropriation.

     Later in the discussion, Secretary Shultz returned to the Contras' need
for funds.  Noting the unlikelihood of an immediate Congressional
appropriation and the improbability that the intelligence committees could be
persuaded to reprogram funds, Secretary Shultz suggested that third countries
be approached for humanitarian aid.  North added that the Intelligence
Authorization Act of 1986 permitted the State Department to approach other
governments for nonmilitary aid.

     No one at the meeting discussed the fact that Country 2 had already given
$32 million to the Contras, including a $24 million donation committed to the
President personally.  Nor was it mentioned that several Far Eastern countries
had been approached for donations or that Country 3 had given $2 million only
6 months earlier.  Instead, Shultz was instructed to prepare for review by the
President a list of countries that could be solicited.

     Later that day, North told Poindexter that the urgency of the need had
lessened: The Enterprise had that day received the last $5 million of the $15
million arms sales to Iran.  North wrote Poindexter:  "You should be aware
that the resistance support organization now has more than $6 million
available for immediate disbursement.  This reduces the need to go to third
countries for help."  North later testified that he wrote the message because
"it was important he [Poindexter] understand that Secretary Shultz didn't need
to go out that afternoon and go ask for additional help."  Poindexter
testified that he understood the $6 million to which North referred was coming
from the Iranian arms sales, but he did not tell the President the $6 million
was available.  North testified that as he was leaving the NSPG meeting, he
mentioned to Poindexter that Iran was supplying $6 million for the Contras,
but that he did not know whether he was overheard.

     North wrote Poindexter that he did not know whether all those present at
the NSPG meeting, such as Chief of Staff Donald Regan, knew of "my private
U.S. operation."  On the other hand, North noted to Poindexter, "the President
obviously knows why he has been meeting with several select people to thank
them for their 'support for Democracy' in CentAm."

     North also realized that disclosure of a significant sum of money
earmarked for Contra support, but only made possible by arms sales to Iran,
could prove politically embarrassing.

The more money there is (and we will have a considerable amount in a few more
days) the more visible the program becomes (airplanes, pilots, weapons,
deliveries, etc.) and the more inquisitive will become people like Kerry,
Barnes, Harkins, et al.  While I care not a whit what they may say about me,
it could well become a political embarrassment for the President and you.

     He suggested that the problem could be "avoided simply by covering it
with an authorized CIA program undertaken with the $15 M" reprogrammed funding
from the DOD budget.

     Poindexter approved North's recommendation to seek the $15 million
reprogramming and responded to his concerns:  "Go ahead and work up the paper
needed for the $15 M reprogramming. . . .  I understand your concerns and
agree.  I just didn't want you to bring it up at NSPG.  I guessed at what you
were going to say.  Don Regan knows very little of your operation and that is
just as well."  By May 28, however, it was clear that "the votes were not
there," and the reprogramming effort was dropped in favor of a campaign to
obtain Congressional support for the $100 million aid package.

     Meanwhile, the concerns that prompted North's silence at the May 16 NSPG
meeting persisted:  Who knew about the secret aid third countries had given
earlier?  In the prior 2 years, members of the NSC staff had approached
several countries for financial assistance to the Contras.  Of these, two had
provided funds or other forms of assistance.  Those solicitations were made
without the knowledge of the Secretary of State and other senior diplomatic
officials.

     The December amendment expressly provided that solicitations for
humanitarian aid were not precluded.  Now, Secretary Shultz and others were
discussing making approaches to countries that had already contributed.
Poindexter and North became concerned that their prior actions would be
uncovered.

     On June 10, North wrote Poindexter, "[A]t this point, I'm not sure who on
our side knows what.  Elliott has talked to Shultz and had prepared a paper re
going to [Country 2 and Country 3] for contributions.  Elliott called me and
asked 'where to send the money.'" North asked Abrams to "keep quiet" until he
talked to Poindexter.  North added:

At this point I need your help.  As you know, I have the accounts and the
means by which this thing needs to be accomplished.  I have no idea what
Shultz knows or doesn't know, but he could prove to be very unhappy if he
learns of the [Country 2 and 3] aid that has been given in the past from
someone other than you.  Did RCM [McFarlane] ever tell Shultz.

     North recommended that Poindexter and McFarlane meet to discuss "how much
Sec Shultz does or does not know abt [Country 2 and 3] so that we don't make
any mistakes."  Poindexter declined to follow North's advice:  "To my
knowledge Shultz knows nothing about the prior financing.  I think it should
stay that way."

     Nonetheless, McFarlane informed Secretary Shultz.  As the Secretary
described the event, on June 16, 1986, he received a telephone call on a
secure phone from McFarlane, who had by then been out of the Government for
approximately 6 months.  In a conversation that occurred completely out of
context and long after the donation had been made, McFarlane told Secretary
Shultz about the Country 2 donation to the Contras.

     Soon thereafter, Abrams recommended Brunei as a likely country from which
to seek humanitarian assistance for the Contras.  As Poindexter put it,
"[t]hey have lots of money."  Brunei also qualified for another reason.  The
Secretary of State did not want to be beholden to any country that was a
recipient of U.S. aid.  Brunei was not.  Originally, the Secretary of State
was to make the approach during a meeting with the Sultan of Brunei in June.
Before Secretary Shultz left, Abrams asked North for a Contra account to which
the money could be sent.  North directed his secretary to prepare an index
card with the account number on it.  North told Abrams that the account was
controlled by the Contras and Abrams so informed Secretary Shultz. Following
Poindexter's instructions, North did not reveal that the NSC staff "had access
to the accounts."  North gave the index card to Abrams, who gave it to the
Secretary of State.  The Secretary decided, however, that he would discuss the
general issue of Central America with the Sultan but that he would not make an
actual solicitation.  The card was not used on that trip.

     On August 8, 1986, Abrams met in London with a representative of the
Government of Brunei.  In an unusual occurrence for Abrams, he traveled under
an alias.  The two men first met at a London hotel, then walked in a nearby
park where Abrams requested $10 million in bridge financing for the Contras.
Asked by the official what Brunei would receive in return, Abrams responded,
"Well, . . . the President will know of this, and you will have the gratitude
of the Secretary and of the President for helping us out in this jam."  The
official persisted, asking, "What concrete do we get out of this?"  Abrams
responded, "You don't get anything concrete out of it."  Abrams then gave the
account number that he had received from North to the Brunei official.

     Although the Sultan of Brunei eventually transferred the $10 million, the
funds never reached the account for which they were intended.  North testified
that he had intended to give Abrams the number of the Lake Resources account
controlled by Secord and Hakim, but the account numbers had been inadvertently
transposed by North or by his secretary, Fawn Hall.

Felix Rodriguez Becomes Disaffected

     Shortly after North traveled to Central America in late April 1986,
Rodriguez decided to leave Central America.  Rodriguez testified:  "I don't
know if I got a sixth feeling or something, but after I saw the people in
there, I didn't feel comfortable with it and I thought we had better leave."
Rodriguez informed Steele, citing fatigue as the reason for his departure.

     Rodriguez met with Vice President Bush in Washington on May 1.  He had
arranged the meeting through the Vice President's National Security Adviser,
Donald Gregg.  The appointment scheduling memo for the meeting states:  "To
brief the Vice President on the status of the war in [a Central American
country] and resupply of the Contras."  Members of the Vice President's staff
gave conflicting testimony over how this description was printed on his
schedule.  Sam Watson, the Vice President's Deputy National Security Adviser,
testified that the memo was inaccurate, and that he did not provide the
description.  Phyllis Byrne, the secretary who typed the memo, testified that
Watson had given her the description.

     In the Old Executive Office Building on his way to the Vice President's
office, Rodriguez stopped by to tell North he was leaving the operation.
Rodriguez said North asked him to remain in Central America, but he ignored
the request.  Escorted by Gregg and Watson, Rodriguez then met with the Vice
President.

     Before Rodriguez could tell the Vice President that he was leaving
Central America, North arrived and told the Vice President about the good job
Rodriguez was doing.  Embarrassed to tell the Vice President he was going to
leave, Rodriguez left the meeting without discussing his resignation, and
eventually returned to Central America.  Rodriguez testified that "at no point
in any of this conversation did I ever mention doing anything that was
remotely connected to Nicaragua and the contras."  Moreover, former Senator
Nicholas Brady, who was also present at the meeting, testified that the
resupply operation was not discussed.

     Rodriguez stayed in Central America, but his relationship with Dutton
became increasingly strained.  According to Dutton, they disagreed on how the
operation should be run.  At the same time, North had his own reservations
that Rodriguez was "something of a loose cannon" who might reveal the
operation.

     On June 8, Dutton complained about Rodriguez in a KL-43 message to North:
"He now wants a $10K emergency fund that he will control.  He also wants
partial control of our fuel fund ($50K)."  Cash funds translated into
unaccountable slush funds so far as Dutton was concerned.  Furthermore, with
the establishment of cash accounts, the resupply operation would be "losing
control of one of the most critical portions of the operation, that is the
money."  Rodriguez was summoned to meet with North and Dutton in Washington on
June 25.  North began by showing Rodriguez the organizational plan drawn up by
Dutton, in which Rodriguez was designated "liaison officer."  After North
stated that he had intelligence that Rodriguez was compromising the operation
by talking over open, unsecured telephone lines, Rodriguez complained that the
poor condition of the aircraft, the communications equipment, and the lack of
adequate radar had endangered the pilots and crew on the flight which hit the
mountain, even though on that flight, despite the fog, the pilot was able to
locate the drop zone by using the aircraft's radar.  North, in turn, offered
Rodriguez $3,000 a month to stay in the operation, which Rodriguez later
accepted.

     Rodriguez testified that at the end of the meeting, he asked to see North
alone.  Rodriguez told North that he had learned "that people are stealing
here," in particular Thomas Clines, a former associate of Edwin Wilson.
Rodriguez expressed his concerns that arms were being sold at inflated prices.
North disputed Rodriguez's conclusions and told Rodriguez that Clines was a
patriot, and that he was not buying equipment, only helping to transport the
goods.  In fact, none of the arms furnished to the FDN and the Southern front
since Rodriguez became involved in the operation were sold to the Contras.
Instead, the Enterprise purchased arms with money obtained from the arms sales
to Iran and private U.S. donors.

     At the close of the meeting, according to Rodriguez, North made one last
comment.  Congress was voting that day on the $100-million Contra aid
legislation, and the television in North's office carried the floor debate.
According to Rodriguez, North looked at the television and said:  "Those
people want me but they cannot touch me because the old man loves my ass."
North did not recall that part of his conversation with Rodriguez.  That
meeting was the last between the two.

New Legislation

     On June 25, 1986 the House approved the Administration's request for $100
million in Contra aid.  Although the bill would not become law for another 3
months, the vote ensured passage of the Contra aid legislation.  The President
announced at 11:30 a.m. that day that the vote "signal[led] a new era of
bipartisan consensus in American foreign policy . . . .  We can be proud that
we as a people have embraced the struggle of the freedom fighters in
Nicaragua.  Today, their cause is our cause."

     The $100 million aid package marked the first time in more than 2 years
that the House had voted to provide lethal assistance to the Contras.  By June
1986, North had established air resupply to both the Northern and Southern
fronts.  The Enterprise had succeeded in flying lethal material to the Contra
fighters inside Nicaragua; even Americans in the employ of North's
organization were flying into that country, all financed by donated funds and
proceeds from the Iranian arms sales overseen by North.  None of North's
activities were disclosed to Congress in advance of the House vote.  Only 1
month later, before the aid bill had been signed, Poindexter would write to
Congress that the NSC was complying with the letter and spirit of the Boland
Amendment.

Selling the Assets to the CIA

     With the House vote in June, North's hopes to reengage the CIA in
Nicaragua were on the verge of being realized.  North was increasingly
occupied with the Iran arms initiative, and he was anxious to give the Contra
resupply operation back to the CIA.  But North wanted the Enterprise to recoup
its investment, and urged the CIA to buy the assets of the resupply operation
in Central America.

     Secord had Dutton prepare a plan to present to the CIA.  North wrote to
Poindexter:

We are rapidly approaching the point where the Project Democracy [PRODEM]
assets in CentAm need to be turned over to CIA for use in the new program.
The total value of the assets (six aircraft, warehouses, supplies, maintenance
facilities, ships, boats, leased houses, vehicles, ordnance, munitions,
communications equipment, and a 6520' runway on property owned by a PRODEM
proprietary) is over $4.5 M.

All of the assets - and the personnel - are owned/paid by overseas companies
with no U.S. connection.  All of the equipment is in first rate condition and
is already in place.  It wd be ludicrous for this to simply disappear just
because CIA does not want to be "tainted" with picking up the assets and then
have them spend $8-10 M of the $100 M to replace it - weeks or months later.
Yet, that seems to be the direction they are heading, apparently based on NSC
guidance.

If you have already given Casey instructions to this effect, I wd vy much like
to talk to you about it in hopes that we can reclaim the issue.  All seriously
believe that immediately after the Senate vote the DRF [Nicaraguan Democratic
Resistance] will be subjected to a major Sandinista effort to break them
before the U.S. aid can become effective.  PRODEM currently has the only
assets available to support the DRF and the CIA's most ambitious estimate is
30 days after a bill is signed before their own assets will be available.
This will be a disaster for the DRF if they have to wait that long.  North
predicted "disaster" if his plan was not followed.

     The plan drafted by Dutton at Secord's request offered two options.  The
first was to sell the assets of the organization to the CIA at cost; the
second would continue the operation on behalf of the CIA for a monthly fee.
Although Dutton, Secord, and North differed in their public testimony over
whose idea it was to include these two options (and Secord denied that he ever
authorized a sale of the assets), Dutton's plan contemplated that the
Enterprise would continue in operation.  The plan indicated a preference for a
sale because the funds generated would permit the Enterprise to engage in
other covert action projects:  "[W]e prefer option 1 with the proceeds from
the sale going back into a fund for continued similar requirements."

     North testified that the idea to sell the Enterprise's assets to the CIA
was Director Casey's.  In a PROF note to Poindexter at the time, North said
that the sale to the CIA would be the only way to finance purchases for the
Contras prior to the time the Congressional appropriation became effective:

Given our lack of movement on other funding options, and Elliot/[C/CATF's]
plea for PRODEM [Project Democracy] to get food to the resistance ASAP, PRODEM
will have to borrow at least $2 M to pay for the food.  That's O.K., and Dick
is willing to do so tomorrow - but only if there is reasonable assurance that
the lenders can be repaid.  The only way that the $2 M in food money can be
repaid is if CIA purchases the $4.5 M worth of PRODEM equipment for about
$2.25 M when the law passes.

     Concluding his efforts to "sell" the project, North offered to send
Poindexter a copy of Dutton's "prospectus," or, as he wrote, "the PROJECT
DEMOCRACY status report.  It is useful, nonattributable reading."

     Poindexter responded that he had not given Casey any "guidance" against
the sale and, indeed, that he approved of North's plan.  Poindexter explained
that he had told CIA Deputy Director Robert Gates "the private effort should
be phased out," but he agreed with North and asked him to talk to Casey about
the plan to sell Project Democracy to the CIA.

     Clair George, the CIA Deputy Director for Operations, testified that
North asked him to buy the aircraft, but that he declined because their use in
private resupply could result in criticism of the CIA.  "I wouldn't buy those
planes if they were the last three planes in Central America," he said.

The Resupply Operation is Interrupted

     Relations between Felix Rodriguez and the resupply operation continued to
deteriorate.  Tensions increased when early in August a dispute erupted
between Secord's deputy, Rafael Quintero, and Rodriguez.  Ignoring Quintero's
instructions not to use the aircraft, Rodriguez took an Enterprise-owned plane
in Miami and flew into the Airbase with a load of spare parts and medicine.
By the time Rodriguez arrived in Central America, Quintero was claiming that
the plane had been stolen.  Quintero gave instructions to refuel and send the
plane back to Miami, full of the supplies.  Rodriguez ignored the order and
told the crew to unload.

     Rodriguez maintained that all the aircraft belonged to the FDN, and
expressed his concern to the Commander that the Enterprise would pull out,
taking the planes away from their rightful owners - the FDN.  On August 6,
Dutton called North to tell him that Rodriguez "took C-123 from Miami."
North later complained to Gregg, the Vice President's National Security
Adviser, that Rodriguez had "made off with an airplane," and asked him, "Will
you call him and find out what the hell is going on?"  Rodriguez told Gregg he
had decided to tell Gregg "about what had been going on."  Steele then called
North to tell him that the "situation was not good."  Steele warned North
there was no one on the "scene who can take charge," and that the Commander
was becoming a "potential problem" because he believed that the aircraft
"belong[ed] to the DRF [Democratic Resistance Forces]."  Steele added that
Rodriguez was "enroute to see Don [Gregg]."

     North sent his colleague and aide, Lt. Col. Robert Earl, to sit in on the
Rodriguez-Gregg meeting.  Briefing Earl before the meeting, North portrayed
Rodriguez as someone who had "insinuated himself into the organization and was
giving rudder orders and it was not his place to do so."

     In the dispute with Rodriguez, Quintero had also accused Rodriguez of air
piracy.  Now, after conferring with Rodriguez, the Commander understood that
he too was accused of air piracy, and feared the aircraft themselves would be
taken.

     On August 8, Rodriguez met with Gregg and set out his allegations about
the Secord group.  Gregg noted the points Rodriguez made:  "using Ed Wilson
group for supplies"; "Felix used by Ollie to get Contra plane repaired . . .";
"a swap of weapons for $ was arranged to get aid for Contras, Clines and
General Secord tied in"; "Hand grenades bought for $3 - sold for $9."  Gregg,
according to Earl, expressed shock about the involvement of Clines.

     On August 12, Gregg convened a meeting to discuss Rodriguez's allegations
with a group of Administration officials involved in Central American
policymaking: Steele; Ambassador Edwin Corr; Deputy Assistant Secretary of
State Walker; the Chief of the Central American Task Force; and from the NSC,
Earl and Ray Burghardt.  Gregg testified that he "went over the notes with the
people who were there."  Without mentioning North's involvement, Gregg
emphasized that he considered Clines not reliable but that he had faith in
Rodriguez.

     Gregg knew by this time that North was involved in the operation.
Rodriguez had made that clear at his initial August 8 meeting, and Gregg's
notes reflect that knowledge.  Gregg testified that at no time did he pass
that information on to the Vice President.  Gregg did not report the meeting,
because he believed it "was a very murky business . . . .  We had never
discussed the Contras.  We had no responsibility for it.  We had no expertise
in it.  I wasn't at all certain what this amounted to . . . .  I felt I had
passed along that material to the organizations who could do something about
it, and I frankly did not think it was Vice Presidential level."

The Resupply Operation Resumes

     Shortly after Gregg's August 12 meeting, Steele was scheduled to meet
with Dutton in Washington to resolve the dispute with the Commander.  Dutton
had told Steele by KL-43 that "It is everyone's intent to continue to support
the effort," but that the aircraft were owned by an independent company, not
the FDN, in part so they could be used to support the Southern front forces as
well as the FDN.  Secord, too, insisted that the aircraft belonged to a
private company.  Earl, North's deputy, told Secord by K143 on August 13 that
the crew should simply pull out because the threat of a lawsuit against the
Commander had "poisoned the atmosphere."  Secord responded that there was more
than "1 million dollars worth equipment" in Central America owned by the
Enterprise, which had no intention of abandoning them.  Secord explained that
the "threat of air piracy lawsuit has nothing to do with [the Commander]. This
was comment made to VP by Ollie ref Max [Felix Rodriguez] vice [the
Commander]."

     Dutton later met with Steele in Washington and by the end of the meeting,
Steele had agreed to help to solve the brewing "confrontation" between the
Commander and the resupply operation.

     The warring parties reached an uneasy resolution after Steele returned to
Central America.  Steele took a more active role in overseeing the flights and
was told to inform the Commander that, while the assets were made available to
the Contra cause, they belonged to a private company whose desire was to turn
them over to the CIA once the Agency resumed Contra support.  Steele felt that
he would have trouble persuading the Commander to accept this position until
he was assured that the CIA would continue to provide support.

     On August 22, Dutton was able to reassure Steele:

Received new guidance through Goode [North] from his boss.  We are to stay in
full operation supporting the drops until 1 Oct.  At that time NSC says that
CIA will have been in operation approx. 1 month.  The CIA will go to [The
Central American government] and explain that they, the CIA, are now in
control.

     During the fall of 1986, problems continued in the resupply operation,
but some success on both the Northern and Southern fronts was finally
achieved.  The resupply operation delivered more than 180,000 pounds of lethal
supplies to the Southern front in September alone.

     In late August, North attended a Restricted Interagency Group meeting at
which the Chief of the CATF and others were asked what steps the airlift -
i.e., according to North, the "covert operation being conducted by this
government to support the Nicaraguan Resistance" - should take now that the
CIA was due to assume control.  According to North, he described at that
meeting the activities in which the Enterprise was engaged and sought approval
from the Restricted Interagency Group to continue until the CIA could take
over. While the Chief of CATF acknowledged that North discussed airdrops to
the Contras, he testified that he did not recall North discussing "his full
service covert action program."

     On August 22, Dutton met with Quintero and devised a new plan for
Southern front resupply that he presented to North: The initial arrival over
the drop zone should be at dusk; once the zone has been identified by the
pilots, repeated sequential drops would be made in the evening without
communication to the troops.  Castillo agreed with the plan, as did Steele.
North also approved it.

     On September 4, North met with Poindexter.  North asked Poindexter for
the "go/no go" on sequential air deliveries to the Southern forces.  Shortly
afterwards, North told Secord to implement the new drop plan and conduct a
"force feed" operation to the South where all supplies would be delivered
sequentially in accordance with Dutton's plan.

     On September 9, Dutton flew with the crew in the second C-123 (now
operational) inside southern Nicaragua to attempt a lethal drop to the troops
Castillo had identified.  But this mission was unable to locate the troops,
prompting Dutton to propose to North using two aircraft on each mission to
increase delivery potential once troops were located and to protect against
increased Sandinista anti-aircraft fire.  Dutton also asked North for help on
weather information and troop location.  North approved the use of two
aircraft and told Dutton to obtain weather information from Steele, and that
he would speak to Castillo about troop locations.  North cautioned Dutton not
to personally fly inside Nicaragua again: The operation could not afford the
exposure if the plane were shot down inside Nicaragua with Col. Robert Dutton
at the controls.

     The pace of delivery stepped up.  The resupply operation was finally
becoming effective only weeks before the CIA would be back in the business. On
September 11, a lethal drop was successfully made to the South using the C-123
while the C-7 delivered more arms for the FDN in the northern regions. Dutton
reported the success of the southern delivery to North.  On the 12th, three
aircraft made more deliveries:  a C-123 delivered 10,000 pounds to the South
and a CT and a Maule delivered to the FDN.  September 13 was "a red letter
day," Dutton wrote to North.  All five aircraft flew at the same time, with
lethal loads dropped in both the North and South.  "The surge is now in full
force," Dutton relayed to North.  The plan at last was working.

     Things were going so well that Dutton advised North that an additional
$20,000 in cash was needed for the fuel fund and that the "C-123 is now armed
with HK-21/7.62 machine gun on the aft ramp, bring on the MI-24."  In fact,
before Dutton returned to Washington, he could report to North that "all
troops should now have equipment.  Will stand by for direction from
[Castillo].  He already told us not to send any more to [a Southern
commandante] for a while.  Never thought we would hear that."

     The "hand-to-mouth" operation that had limped along on limited resources
for so long had, with the support of certain individuals, finally delivered
the goods.  Under North's direction, Dutton's operational control, Castillo's
critical assistance in locating, dispatching, and scheduling the needs of the
Southern troops, and Steele's coordination with the Commander, the South
received arms, while deliveries continued apace to the FDN in the North.
Indeed, for the rest of September, lethal drops were successfully made to both
the FDN and the Southern forces.  North duly reported the operation's success
to Poindexter.

     When Dutton returned from Central America later that month, he met with
North.  North asked him to arrange a 1-day trip to the region so that he could
personally thank the pilots and crew.  North told him, "Bob, you will never
get a medal for this, but some day the President will shake your hand and
thank you for it."

     Dutton had also prepared a photograph album depicting the operation: the
operational bases, drop zones, aircraft, munitions, and the crew replete with
assault machine guns and other assorted weapons.  Dutton showed the album to
North, who liked it and said he wanted to show it to "the top boss."  North
testified that he sent the album to Poindexter to show to the President, but
never heard further about the album.  Poindexter testified that he did not
show the album to the President.

North Expands His Special Operations

     Even with the $100 million in appropriated funds becoming available in
the near future, North tried to get other aid for the Contras.  In May,
Israeli Defense Minister Yitzhak Rabin had offered to provide Israeli military
advisers for the Southern front.  Although nothing came of this offer, North
and Rabin met again in September and discussed an Israeli transfer of Soviet
bloc weapons to the Contras.  Rabin wanted "to know if we had any need for
SovBloc weaps and ammo he could make avail."  Rabin asked whether North's
ship, the Erria, had left the Mediterranean.  When North responded that it was
in Lisbon, Rabin suggested that it dock at Haifa and "have it filled w
whatever they cd assemble" of a "recently seized PLO shipment captured at
sea."

     Poindexter sanctioned the Israeli arms offer:  "I think you should go
ahead and make it happen.  It can be a private deal between Dick [Secord] and
Rabin that we bless . . . .  Keep the pressure on Bill [Casey] to make things
right for Secord."  Later, Poindexter cautioned "[a]bsolutely nobody else
should know about this.  Rabin should not say anything to anybody else except
you or me."  On September 15, North told Poindexter that "orders were passed
to the ship this morning to proceed to Haifa to pick up the arms.  Loading
will be accomplished by Israeli military personnel."

     Despite Poindexter's caution, North later recounted the offer in a
memorandum briefing the President for a visit from Israeli Prime Minister
Shimon Peres.  North wrote that Prime Minister Peres was likely to raise
certain sensitive issues, such as the transfer of Soviet bloc arms by the
Israelis "for use by the Nicaraguan democratic resistance."  North
recommended: "If Peres raises this issue, it would be helpful if the President
thanked him since the Israelis hold considerable stores of bloc ordinance
compatible with what the Nicaraguan resistance now uses."  Next to this
sentence, Poindexter penciled:  "Rabin.  Very tightly held."

     As another expansion of his special operations, North received an offer
from a third party to engage in sabotage and other activities inside
Nicaragua, to be financed with Enterprise funds.  Poindexter approved the
sabotage plan, but instructed North not to become involved in conspiracy or
assassinations.  According to North, the plan was never implemented because
North was dismissed.